EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) is entered into as of this 23rd day of
April, 2007 by and between Chembio Diagnostics, Inc., a Nevada corporation
(the
“Company”), and Xxxxx Xxxxxxxxxx (“Employee”) and to be effective as of March 5,
2007 (the “Effective Date”). Employee and the Company are sometimes referred to
individually as a “Party” and collectively as the “Parties”.
In
consideration of the mutual covenants, promises and agreements herein contained,
the Company and Employee hereby covenant, promise and agree to and with each
other as follows:
1. Employment.
The
Company shall employ Employee and Employee shall perform services for and
on
behalf of the Company upon the terms and conditions set forth in this
Agreement.
2. Positions
and Duties of Employment.
Employee shall be required to devote his full energy, skill and best efforts
as
required to the furtherance of his managerial duties with the Company as
the
Company’s Senior Vice President of Research and Development. While serving in
such capacities, Employee shall have the responsibilities, duties, obligations,
rights, benefits and requisite authority as is customary for his position
and as
may be determined by the Company’s Board of Directors (the
“Board”).
Employee
understands that his employment as Senior Vice President of Research and
Development of the Company involves a high degree of trust and confidence,
that
he is employed for the purpose of furthering the Company’s reputation and
improving the Company’s operations and profitability, and that in executing this
Agreement he undertakes the obligations set forth herein to accomplish such
objectives. Employee agrees that he shall serve the Company fully, diligently,
competently and to the best of his ability. Employee certifies that he fully
understands his right to discuss this Agreement with his attorney, that he
has
availed himself of this right to the extent that he desires, that he has
carefully read and fully understands this entire Agreement, and that he is
voluntarily entering into this Agreement.
3. Duties.
Employee shall perform the following services for the Company:
(a) Employee
shall serve as Senior Vice President of Research and Development of the Company,
or in such other position as determined by the Board, and in those capacities
shall work with the Company to pursue the Company’s plans as directed by the
Board.
(b) Employee
shall perform duties with the functions of an officer of the Company, subject
to
the direction of the Board.
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(c) During
the Term (as defined in Section 4 below) of this Agreement, Employee shall
devote substantially all of Employee’s business time to the performance of
Employee’s duties under this Agreement. Without limiting the foregoing, Employee
shall perform services on behalf of the Company for at least forty hours
per
week, and Employee shall be reasonably available at the request of the Company
at other times, including weekends and holidays, to meet the needs and requests
of the Company’s customers.
(d) During
the Term, Employee will not engage in any other activities or undertake any
other commitments that conflict with or take priority over Employee’s
responsibilities and obligations to the Company and the Company’s customers,
including without limitation those responsibilities and obligations incurred
pursuant to this Agreement.
4.
Term.
Unless
terminated earlier as provided for in this Agreement, the term of this Agreement
shall be for three years, commencing on the Effective Date and ending on
the
third anniversary of the Effective Date (the “Term”). If the employment
relationship is terminated by either Party, Employee agrees to cooperate
with
the Company and with the Company’s new management with respect to the transition
of the new management in the operations previously performed by Employee.
Upon
Employee’s termination, Employee agrees to return to the Company all Company
documents (and all copies thereof), any other Company property in Employee’s
possession or control, and any materials of any kind that contain or embody
any
proprietary or confidential material of the Company.
5.
Base
Salary.
As
compensation for the services to be performed by Employee during the Term,
Company shall pay Employee a base salary payable in accordance with the
Company’s customary payroll practices (the “Base Salary”), at the following
annual rates:
(a)
For
the
period from the Effective Date to the first anniversary of the Effective
Date
(the “First Anniversary”), $185,000.00 per year.
(b)
For
the
period from the First Anniversary of the Effective Date to the second
anniversary of the effective date (the “Second Anniversary”), $210,00.00 per
year.
(c)
For
the
period from the Second Anniversary of the Effective Date to the third
anniversary of the Effective Date, $235,000.00 per year.
6.
DPP
Cash Bonus.
(a) In
respect to the services to be performed by Employee hereunder, the Company
shall
pay to Employee additional incentive cash compensation for calendar year
2007
(“2007”), calendar year 2008 (“2008”) and calendar year 2009 (“2009”) up to the
maximum amount of thirty-seven and one-half (37.5%) percent of Employee’s
Calendar Year Base Salary (as hereinafter defined) for each of 2007, 2008
and
2009 (each, a “DPP Cash Bonus”) based upon the performance of the Company’s Dual
Path Platform (“DPP”) Technology during 2007, 2008 and 2009 (the “DPP Technology
Performance”), which is directly related to the achievement of certain DPP
Technology annual revenue targets budgeted by management of the Company for
2007, 2008 and 2009 (each a “DPP Revenue Target”). Employee acknowledges that he
is aware of the DPP Revenue Target for 2007, and acknowledges and accepts
the
DPP Revenue Target for 2008 and 2009 will be solely determined by the Company
subsequent to the Effective Date. The amount of the DPP Cash Bonus, if any,
to
be earned by Employee for each of 2007, 2008 and 2009 shall be determined
in the
following manner:
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(i)
If
the
Actual DPP Revenue Amount (as defined below) exceeds the DPP Revenue Target
for
the year under consideration (i.e., either 2007, 2008 or 2009), the Company
shall pay to Employee the full DPP Cash Bonus for such year, which shall
equal
thirty-seven and one-half (37.5%) percent of Employee’s Calendar Year Base
Salary for such year;
(ii)
If
the
Actual DPP Revenue Amount is seventy-five (75%) percent or less than the
DPP
Revenue Target for the year under consideration, Employee shall not receive
any
DPP Cash Bonus for such year; provided,
however,
that,
notwithstanding the foregoing, if the Actual DPP Revenue Amount is between
fifty
(50%) percent and seventy-five (75%) percent of the DPP Target for the year
under consideration, the Company shall pay to Employee a DPP Cash Bonus for
such
year equal to $10,000, which DPP Cash Bonus shall not reduce any Discretionary
Cash Bonus (as such term is defined in Section 7 below) that the Company
may
award to Employee pursuant to Section 7 of this Agreement; and
(iii)
If
the
Actual DPP Revenue Amount is between seventy-six (76%) percent and one hundred
(100%) percent of the DPP Revenue Target for the year under consideration,
the
Company shall pay to Employee a DPP Cash Bonus for such year equal to one
and
one-half (1.5%) percent of Employee’s Calendar Year Base Salary for each full
(and only full) one (1%) percent (up to a maximum of twenty-five (25%) percent)
by which Actual DPP Revenue exceeds seventy-five (75%) percent of the
appropriate DPP Revenue Target. For example, if (A) Employee’s Calendar Year
Base Salary for 2007 is $180,000, the maximum DPP Cash Bonus Employee may
earn
for 2007 is $67,500 (i.e., thirty-seven and one-half (37.5%) percent multiplied
by $180,000); and (B) Actual DPP Revenue is $80 and the DPP Revenue Target
for
2007 is $100, the Company would have achieved eighty (80%) percent of the
DPP
Revenue Target for 2007; then (C) Employee would be entitled to $13,500 as
his
DPP Cash Bonus for 2007, or 5/25 or twenty (20%) percent, of the maximum
$67,500
DPP Cash Bonus available to be earned by Employee for 2007.
(b)
For
purposes of this Agreement, the following terms shall have the following
meanings:
(i)
“Calendar
Year Base Salary” means, for the year under consideration, Employee’s actual
gross base salary for such year as reported on the Internal Revenue Service
(“IRS”) Form W-2 Wage and Tax Statement provided by the Company to Employee for
such year; and
(ii)
“Actual
DPP Revenue” means, for the year under consideration, the Company’s product,
license and royalty revenue for its DPP Technology as solely determined by
the
Company in accordance with generally accepted accounting principles,
consistently applied.
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(c)
The
calculation as to the amount of the DPP Cash Bonus, if any, to be paid by
the
Company to Employee for 2007, 2008 and 2009 shall be completed by the Company
within ten (10) days after the filing by the Company of its Annual Report
on
Form 10-KSB (“10-K”) for the relevant year. The DPP Cash Bonus, if any, shall be
paid by the Company to Employee promptly after the completion of each such
calculation.
7.
Discretionary
Cash Bonus.
Subject
to the recommendation of the Company’s chief executive officer, but in the sole
and absolute discretion of the Board or the Compensation Committee of the
Board,
the Company may award Employee a discretionary cash bonus of up to a maximum
of
twelve and one-half (12.5%) percent of the Employee’s Calendar Year Base Salary
for each calendar year during the Term (“Discretionary Cash Bonus”). Any
Discretionary Cash Bonus awarded by the Company to Employee hereunder shall
be
paid within ten (10) days after the filing by the Company of its 10-K for
the
relevant year.
8.
Base
Stock Grant.
In
recognition of Employee’s importance and value to the Company and as an
inducement for Employee to enter into this Agreement, but subject in all
respects to the terms and conditions of this Agreement, including, without
limitation, the vesting schedule set forth below and the provisions of Section
10 herein, the Company hereby grants to Employee on the date of this Agreement
(for purposes of this Section 8, the “Stock Grant Date”), 200,000 shares (the
“Base Shares” and together with the DPP Bonus Shares (as hereinafter defined),
if any, the “Shares”) of the Company’s common stock, $0.01 par value per share
(the “Common Stock”). The purchase price for the Base Shares is $0. One Hundred
Thousand (100,000) of the Base Shares shall vest immediately on the Stock
Grant
Date. Subject to the terms and conditions of this Agreement, the remaining
One
Hundred Thousand (100,000) of the Base Shares (the “Restricted Base Shares”)
shall vest as follows:
(a)
Fifty
Thousand (50,000) Shares on the First Anniversary; and
(b)
Fifty
Thousand (50,000) Shares on the Second Anniversary.
Subject
to Section 10(i) hereof, certificates representing the Base Shares shall
be
issued immediately and delivered by the Company to Employee promptly after
each
vesting date. There shall be no proportionate or partial vesting of the Base
Shares between the aforesaid vesting dates.
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9.
DPP
Bonus Stock Grant.
(a)
In
respect of the services to be performed by Employee hereunder, the Company
shall
grant to Employee up to the additional maximum amount of 50,000 shares of
Common
Stock (the “DPP Bonus Shares”) for 2007 and 2008 based upon the DPP Technology
Performance. The number of DPP Bonus Shares, if any, to be granted to Employee
for each of 2007 and 2008 shall be determined in the following
manner:
(i)
If
the
Actual DPP Revenue Amount exceeds the DPP Revenue Target for the year under
consideration (i.e., either 2007 or 2008), the Company shall grant to Employee
the full 50,000 DPP Bonus Shares for such year;
(ii)
If
the
Actual DPP Revenue is seventy-five (75%) percent or less than the DPP Revenue
Target for the year under consideration, Employee shall not receive any DPP
Bonus Shares for such year; and
(iii)
If
the
Actual DPP Revenue is between seventy-six (76%) percent and one hundred (100%)
percent of the DPP Revenue Target for the year under consideration, the Company
shall grant to Employee, 2,000 DPP Bonus Shares for each full (and only full)
one (1%) percent (up to a maximum of twenty-five (25%) percent) by which
Actual
DPP Revenue exceeds seventy-five (75%) percent of the appropriate DPP Revenue
Target. For example, if Actual DPP Revenue is $80 for 2007, and the DPP Revenue
Target is $100 for 2007, the Company would have achieved eighty (80%) percent
of
the DPP Revenue Target for 2007 which would entitle Employee to 10,000 DPP
Bonus
Shares, or 5/25 or twenty (20%) percent, of the maximum 50,000 DPP Bonus
Shares
available to be earned by Employee for 2007.
(b)
The
calculation as to the number of DPP Bonus Shares, if any, to be granted by
the
Company to Employee for 2007 and 2008 shall be completed by the Company within
ten (10) days after the filing by the Company of its 10-K for the relevant
year.
Subject to Section 10(i) hereof, certificates representing the DPP Bonus
Shares
earned by Employee, if any, shall be issued and delivered by the Company
to
Employee promptly after the completion of each such calculation.
10.
Certain
Provisions Relating to the Shares and the Restricted Shares.
(a)
Restrictions
on Transfer.
Employee shall not sell, transfer, pledge, hypothecate, assign or otherwise
encumber and dispose of the Restricted Shares, except as set forth in this
Agreement. Any attempted sale, transfer, pledge, hypothecation, assignment
or
other disposition of the Restricted Shares in violation of this Agreement
shall
be void and of no effect and the Company shall have the right to disregard
the
same on its books and records and to issue “stop transfer” instructions to its
transfer agent. The provisions of this Section 10(a) shall cease to apply
to the
Restricted Shares on the date such Shares become vested hereunder.
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(b)
Forfeiture;
Immediate Vesting.
If
Employee’s employment is terminated by Employee at any time other than during
the six (6) month period immediately following a Change of Control (as such
term
is hereinafter defined) or by the Company for Cause (as such term is hereinafter
defined), then Employee will forfeit, without compensation, any and all
Restricted Shares that are unvested as of the date of termination of Employee’s
employment. In the event of a Change of Control, or in the event the Company
terminates Employee’s employment hereunder without his consent for a reason
other than Cause, then all of the Restricted Shares shall vest
immediately.
(c)
Adjustments.
In the
event of any stock dividend, split up, split-off, spin-off, distribution,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or liquidation or the like, the Restricted Shares shall be
adjusted on the same basis as other shares of Common Stock.
(d)
Taxes;
Section 83(b) Election.
Employee acknowledges that it is Employee’s sole responsibility and not the
Company’s, to file timely and properly any election under Section 83(b) of the
Internal Revenue Code of 1986, as amended (the “Code”), and any corresponding
provisions of the state tax laws, if Employee wishes to utilize such election.
Employee further acknowledges that (i) no later than the date on which any
Shares shall have been granted to Employee hereunder, Employee shall pay
to the
Company, or make arrangements satisfactory to the Company regarding payment
of,
any federal, state or local income or other taxes of any kind required by
law to
be withheld with respect to any such Shares; (ii) the Company shall, to the
extent permitted by law, have the right to deduct from any payment of any
kind
otherwise due to Employee any federal, state or local income or other taxes
of
any kind required by law to be withheld with respect to any Shares which
shall
have been granted by the Company hereunder, including that the Company may,
but
shall not be required to, sell a number of Shares sufficient to cover applicable
withholding taxes; and (iii) in the event that Employee does not satisfy
(i)
above on a timely basis, the Company may, but shall not be required to (and
shall not to the extent it would violate the Xxxxxxxx-Xxxxx Act), pay such
required withholding and treat such amount as a demand loan to Employee at
the
maximum rate permitted by law, with such loan, at the Company’s sole discretion
and provided the Company so notifies Employee within thirty (30) days of
the
making of the loan, secured by the Shares and any failure by Employee to
pay the
loan upon demand shall entitle the Company to all of the rights at law of
a
creditor secured by the Shares. The Company may hold as security any
certificates representing any Shares and, upon demand of the Company, Employee
shall deliver to the Company any certificates in Employee’s possession
representing Shares together with a stock power duly endorsed in blank.
(e)
Legends.
All
certificates representing the Shares shall have endorsed thereon the following
legends:
(i) “THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT
REQUIRED.”
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(ii)
Any
legend required to be placed thereon by applicable blue sky laws or other
law of
any state or securities law.
(f)
Securities
Representations.
The
Shares are being issued to Employee in reliance upon the following express
representations and warranties: (i) the Shares are being acquired for Employee’s
own account and not with a view to, or for sale with, the distribution thereof,
nor with any present intention of distributing or selling any such Shares;
(ii)
Employee has been advised that he may be an “affiliate” within the meaning of
Rule 144 under the Securities Act of 1933 (the “Act”) and in this connection the
Company is relying in part on Employee’s representations set forth in this
paragraph; (iii) if Employee is an affiliate, the Shares must be held and
sold
only pursuant to any available exemption from any applicable resale restrictions
or until the Company files a registration statement (or a “re-offer prospectus”)
with regard to such Shares and the Company is under no obligation to register
the Shares (or to file a “re-offer prospectus”); (iv) the transfer of Shares has
not been registered under the Act, and the Shares must be held indefinitely
unless subsequently registered under the Act or an exemption from such
registration is available and the Company is under no obligation to register
the
Shares; and (v) if Employee is an affiliate, Employee understands that the
exemption from registration under Rule 144 will not be available unless (i)
a
public trading market then exists for the Shares of the Company; (ii) adequate
information concerning the Company is then available to the public; and (z)
other terms and conditions of Rule 144 or any exemption therefrom are complied
with and that any sale of the Shares may be made only in limited amounts
in
accordance with such terms and conditions.
(g)
Not
an
Employment Agreement.
The
issuance of the Shares hereunder does not constitute an agreement by the
Company
to continue to employ Employee during the entire, or any portion of, the
Term,
including, but not limited to, any period during which the Restricted Shares
are
unvested.
(h)
Attorney-in-Fact
Status.
The
Company, its successors and assigns, is hereby appointed Employee’s
attorney-in-fact, with full power of substitution, for the purpose of carrying
out the provisions of this Agreement and taking any action and executing
any
instruments which such attorney-in-fact may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Upon the Board’s request, Employee
will deliver to the Company a duly signed stock power, endorsed in blank,
relating to the Restricted Shares, solely to enable the Company to retire
or
cancel the Restricted Shares upon forfeiture in accordance with this
Agreement.
(i)
Uncertificated
Shares.
Notwithstanding anything else herein, the Board may, in its sole and absolute
discretion and in accordance with Nevada law, issue the Shares in the form
of
uncertificated shares of Common Stock. Such uncertificated shares shall be
credited to a book entry account maintained by the Company (or its designee)
on
Employee’s behalf. If thereafter, certificates are issued with respect to the
uncertificated Shares, such issuance and delivery of certificates shall be
in
accordance with the applicable terms of this Agreement.
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11.
Stock
Option Grant.
(a)
Grant
of Stock Options.
In
further recognition of Employee’s importance and value to the Company and as an
additional inducement for Employee to enter into this Agreement, but subject
in
all respects to the terms and conditions of this Agreement, including, without
limitation, the vesting schedule set forth below, and the Company’s 1999 Equity
Incentive Plan (the “Plan”) and the Company’s form of Stock Option Agreement
annexed hereto as Exhibit A, the Company hereby grants to Employee on the
date
of this Agreement (for purposes of this Section 11, the “Stock Option Grant
Date”), stock options to purchase 300,000 shares of Common Stock (the
“Options”), which are intended to be incentive stock options under the Plan and
within the meaning of Section 422 of the Code. The price per share of the
Options shall be equal to the Fair Market Value (as such term is defined
below)
of the Common Stock on the Stock Option Grant Date. For purposes of this
Agreement, the term “Fair Market Value” shall mean the closing price of the
Common Stock on the Stock Option Grant Date on the OTC Bulletin Board, as
reported by the National Association of Securities Dealers Automated Quotation
System (“NASDAQ”) or NASDAQ’s successor. One hundred thousand (100,000) of the
Options shall vest immediately on the Stock Option Grant Date. Subject to
the
terms and conditions of this Agreement, the remaining 200,000 Options (the
“Restricted Options”) shall vest as follows:
(i)
One
Hundred Thousand (100,000) Options on the First Anniversary; and
(ii)
One
Hundred Thousand (100,000) Options on the Second Anniversary.
(b)
No
Proportionate or Partial Vesting.
There
shall be no proportionate or partial vesting of the Restricted Options between
the vesting dates set forth in subparagraph 11(a) above.
(c)
Restrictions
on Transfer.
Employee shall not exercise, sell, transfer, pledge, hypothecate, assign
or
otherwise encumber or dispose of the Restricted Options, except as set forth
in
this Agreement. Any attempted exercise, sale, transfer, pledge, hypothecation,
assignment or other disposition of the Restricted Options in violation of
this
Agreement shall be void and of no effect. The provisions of this Section
11(c)
shall cease to apply to the Restricted Options on the date such Options become
vested hereunder.
(d)
Forfeiture;
Immediate Vesting.
If
Employee’s employment is terminated by Employee at any time other than during
the six (6) month period immediately following a Change of Control or by
the
Company for Cause, then Employee will forfeit, without compensation, any
and all
Restricted Options that are unvested as of the date of termination of Employee’s
employment. In the event of a Change of Control or in the event the Company
terminates Employee’s employment hereunder without his consent for a reason
other than Cause, then all of the Restricted Options shall vest
immediately.
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12.
Certain
Additional Provisions Relating to Compensation and
Other
Employee Benefits.
(a)
If
Employee is eligible, the Company shall include Employee in any profit sharing
plan, executive stock option plan, pension plan, retirement plan, medical
and/or
hospitalization plan, and/or any and all other benefit plans, except for
disability and life insurance, which may be placed in effect by the Company
for
the benefit of the Company’s executive officers during the Term. Except for the
fact that the Company at all times shall provide Employee with all or at
least a
portion of Employee’s medical and/or hospitalization insurance, which shall not
be less than that afforded to the Company’s other executive officers, nothing in
this Agreement shall limit (i) the Company’s ability to exercise the discretion
provided to it under any such benefit plan, or (ii) the Company’s discretion to
adopt, not adopt, amend or terminate any such benefit plan at any
time.
(b) Employee
shall be entitled to four (4) weeks vacation leave for each year of the Term,
as
well as sick leave, medical insurance coverage and any other benefits consistent
with the Company’s plans and policies in effect for the Company’s executives
from time to time. The Company may modify in its sole and absolute discretion
such benefits from time to time as it considers necessary or appropriate.
Up to
two (2) weeks of Employee’s vacation may be carried forward to the following
year, and Employee acknowledges and agrees that any accrued vacation earned
by
Employee in excess of such amount shall be extinguished on the Effective
Date.
(c)
During
the Term, Employee shall be reimbursed for reasonable expenses that are
authorized by the Company and that are incurred by Employee for the benefit
of
the Company in accordance with the standard reimbursement practices of the
Company. Any direct payment or reimbursement of expenses shall be made only
upon
presentation of an itemized accounting conforming in form and content to
standards prescribed by the IRS relative to the substantiation of the
deductibility of business expenses.
(d)
During
the Term, the Company shall reimburse Employee for all expenses Employee
incurs
in connection with his use of a cellular telephone or smart-phone as provided
to
all other executive officers of the Company.
(e)
During
the Term, the Company shall provide Employee $400.00 per month, as compensation
for Employee’s cost of ownership or leasing of a vehicle to be used for Company
purposes.
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(f)
Any
payments which the Company shall make to Employee pursuant to this Agreement
shall be reduced by standard withholding and other applicable payroll
deductions, including, without limitation, federal, state or local income
or
other taxes, social security and medicare taxes, state unemployment insurance
deductions, state disability insurance deductions, and any other applicable
tax
or deduction (collectively, any withheld taxes and deductions,
“Deductions”).
13.
Confidentiality.
(a)
Employee
hereby warrants, covenants and agrees that, without the prior express written
consent of the Company, and unless required by law, court order or similar
process, Employee shall hold in the strictest confidence, and shall not disclose
to any person, firm, corporation or other entity, any and all of the Company’s
information, including, for example, and without limitation, any data related
to
(i) drawings, sketches, plans or other documents concerning the Company’s
business or development plans, customers or suppliers, and research and
development efforts; (ii) the Company’s development, design, construction or
sales and marketing methods or techniques; or (iii) the Company’s trade secrets
and other “know-how” or information not of a public nature, regardless of how
such information came to the custody of Employee (collectively, subsections
(i),
(ii) and (iii) of this Section 13(a), “Information”). For purposes of this
Agreement, such Information shall include, but not be limited to, any
information regarding a formula, pattern, compilation, program, device, method,
technique or process that (A) derives independent economic value, present
or
potential, not being generally known to, and not being readily ascertainable
by
proper means by, other persons who can obtain economic value from its disclosure
or use, and (B) is the subject of Company efforts.
(b) In
the
event Employee is required by law, court order or similar process to disclose
any Information, Employee shall provide immediate notice of such obligatory
disclosure prior to such disclosure, so that the Company, at its sole option,
may attempt to seek a protective order or other appropriate remedy to preclude
such disclosure.
(c)
The
warranty, covenant and agreement set forth in this Section 13 shall not expire,
shall survive this Agreement, and shall be binding upon Employee without
regard
to the passage of time or any other event.
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14.
Non-Compete.
Employee acknowledges and recognizes the highly competitive nature of the
Company’s business and that Employee’s duties hereunder justify restricting
Employee’s further employment following any termination of employment. Employee
further acknowledges and understands that the Company recognizes Employee’s
importance and value to the Company and thus has provided Employee with the
overall compensation package described hereunder in order to induce Employee
to
enter into this Agreement. Accordingly, Employee agrees that so long as Employee
is employed by the Company, and (i) for a period of two (2) years following
the
termination of this Agreement, Employee shall not induce or attempt to induce
any employee of the Company to leave the employ of the Company, or in any
way
interfere with the relationship between the Company and any other employee;
(ii)
for a period of one (1) year following the termination of this Agreement,
Employee, except when acting at the request of the Company on behalf of or
for
the benefit of the Company, shall not induce customers, agents or other sources
of distribution of the Company’s business under contract or doing business with
the Company to terminate, reduce, alter or divert business with or from the
Company; and (iii) for a period of one (1) year following the termination
of
this Agreement, Employee shall not, directly or indirectly, either as a
principal, agent, employee, employer, consultant, partner, member or manager
of
a limited liability company, shareholder of a company that does not have
securities registered under the Securities Exchange Act of 1934 (the “1934
Act”), or a shareholder in excess of one (1%) percent of a company that has
securities registered under the 1934 Act, corporate officer or director,
or in
any other individual or representative capacity, engage or otherwise participate
in any manner or fashion in any business that directly competes with the
business activities of the Company in or about any market in which the Company
is, or has publicly announced a plan for doing business. Employee further
covenants and agrees that the restrictive covenant set forth in this paragraph
is reasonable as to duration, terms, and geographical area and that the same
protects the legitimate interests of the Company, imposes no undue hardship
on
Employee, and is not injurious to the public. The covenant set forth under
(ii)
above shall not apply if Employee’s employment is terminated within twelve (12)
months of a Change in Control. Ownership by Employee, for investment purposes
only, of less than one (1%) percent of any class of securities of a corporation
if said securities are listed on a national securities exchange or registered
under the 1934 Act shall not constitute a breach of the covenant set forth
under
(ii) above. It is the desire and intent of the Parties that the provisions
of
this paragraph be enforced to the fullest extent permissible under the laws
and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular portion of this paragraph shall be adjudicated
to
be invalid or enforceable, this paragraph shall be deemed amended to apply
in
the broadest allowable manner and to delete therefrom the portion adjudicated
to
be invalid or unenforceable, such amendment and deletion to apply only with
respect to the operation of this paragraph in the particular jurisdiction
in
which that adjudication is made.
11
15. Termination.
(a) If
Employee’s employment is terminated by the Company without Cause, or if Employee
terminates his employment for Reasonable Basis (as defined below), then the
Company shall, in exchange for Employee’s execution of a general release and
waiver of claims against the Company as of the termination date in a form
reasonably acceptable to the Company, continue to pay as severance Employee’s
Base Salary for a period of twelve (12) months following the date such general
release and waiver of claims is executed. Such payments shall be made in
accordance with the Company’s customary payroll practices, and shall be subject
to all applicable Deductions. In the event of any such termination set forth
in
this Section 15(a), Employee will not be entitled to any additional cash
compensation or benefits beyond what is provided in the first sentence of
this
Section 15(a); provided,
however,
that in
the event any termination set forth in this Section 15(a) shall occur during
either 2007, 2008, or 2009, Employee shall continue to be entitled to receive
a
DPP Cash Bonus for the year of termination (in accordance with the calculation
and timing of payment procedures set forth in Section 6(c) hereof), which
DPP
Cash Bonus, if any, shall be prorated based upon the length of time Employee
was
employed by the Company during the year of termination in the following manner:
(w) if Employee was employed by the Company through the end of the Company’s
third fiscal quarter, the Company shall pay Employee the full DPP Cash Bonus,
if
any, for such year; (x) if Employee was employed by the Company through the
end
of the Company’s second fiscal quarter, but Employee’s employment with the
Company terminated prior to the end of the Company’s third fiscal quarter, the
Company shall pay Employee ninety (90%) percent of the DPP Cash Bonus, if
any,
for such year; (y) if Employee was employed by the Company through the end
of
the Company’s first fiscal quarter, but Employee’s employment with the Company
terminates prior to the end of the Company’s second fiscal quarter, the Company
shall pay Employee sixty (60%) percent of the DPP Cash Bonus, if any, for
such
year; and (z) if Employee’s employment with the Company terminates prior to the
end of the Company’s first fiscal quarter, the Company shall pay Employee thirty
(30%) of the DPP Cash Bonus, if any, for such year.
(i) For
purposes of this Agreement, “Cause” shall mean that the Board, acting in good
faith based upon the information then known to the Company, determines that
Employee has engaged in or committed any of the following: (A) willful
misconduct, gross negligence, theft, fraud, or other illegal conduct; (B)
refusal or unwillingness to perform Employee’s duties; (C) performance by
Employee of Employee’s duties determined by the Board to be inadequate in a
material respect; (D) breach of any applicable non-competition provision,
confidentiality provision or other proprietary information or inventions
agreement between Employee and the Company; (E) inappropriate conflict of
interest; (F) insubordination; (G) failure to follow the directions of the
Board
or any committee thereof; (H) any other material breach of this Agreement.
In
addition, an indictment or conviction of any felony, or any entry of a plea
of
nolo contendre, under the laws of the United States or any State shall be
considered “Cause” hereunder. “Cause” shall be specified in a notice of
termination to be delivered by the Company to Employee no later than the
date as
of which termination is effective.
(ii) For
purposes of this Agreement, “Reasonable Basis” shall mean (A) a material breach
of this Agreement by the Company, provided, however, that Employee shall
provide
written notice to the Company of any alleged material breach, and any alleged
material breach will only be considered a material breach if the Company
fails
to cure such breach within thirty days after receiving notice of such breach;
(B) termination of Employee’s employment by the Company without Cause during the
term hereof; (C) a reduction in Employee’s salary, except to the extent that a
majority of the other executive officers of the Company incur reductions
of
salary that average no less than the percentage reduction incurred by Employee;
or (D) termination of Employee’s employment by Employee within six (6) months
after a “Change Of Control,” which is defined as any of the
following:
12
(1) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation, other than a merger of the Company in
which
the holders of the Company’s voting common stock immediately prior to the merger
own a majority of the voting common stock of the surviving corporation
immediately after the merger;
(2) any
sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the
Company;
(3) any
approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;
(4) the
acquisition by any person or entity, or any group of persons and/or entities
of
a majority of the stock entitled to elect a majority of the directors of
the
Company; or
(5) subject
to applicable law, in a Chapter 11 bankruptcy proceeding, the appointment
of a
trustee or the conversion of a case involving the Company to a case under
a
Chapter 7 bankruptcy proceeding.
(b) In
the
event that Employee’s employment with the Company is terminated for Cause, by
reason of Employee’s death or disability, or due to Employee’s resignation or
voluntary termination (other than for a Reasonable Basis), then all compensation
(including, without limitation, any Base Salary, and the right to receive
DPP
Bonus Shares, DPP Cash Bonuses, and discretionary Cash Bonuses) and benefits,
and the vesting of any unvested Restricted Base Shares or Restricted Options,
will cease as of the effective date of such termination, and Employee shall
receive no severance benefits, or any other compensation; provided that Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination.
(c) Employee
agrees that the payments contemplated by this Agreement shall constitute
the
exclusive and sole remedy for any termination of employment, and Employee
covenants not to assert or pursue any other remedies, at law or in equity,
with
respect to any termination of employment.
(d) Any
Party
terminating this Agreement shall give prompt written notice to the other
Party
hereto advising such other Party of the termination of this Agreement stating
in
reasonable detail the basis for such termination (the “Notice of Termination”).
The Notice of Termination shall indicate whether termination is being made
for
Cause (if the Company has terminated the Agreement) or for a Reasonable Basis
(if Employee has terminated the Agreement).
16. Remedies.
If
there is a breach or threatened breach of any provision of Section 13 or
Section
14 of this Agreement, the Company will suffer irreparable harm and shall
be
entitled to an injunction restraining Employee from such breach. Nothing
herein
shall be construed as prohibiting the Company from pursuing any other remedies
for such breach or threatened breach.
13
17. Severability.
It is
the clear intention of the Parties to this Agreement that no term, provision
or
clause of this Agreement shall be deemed to be invalid, illegal or unenforceable
in any respect, unless such term, provision or clause cannot be otherwise
construed, interpreted, or modified to give effect to the intent of the Parties
and to be valid, legal or enforceable. The Parties specifically charge the
trier
of fact to give effect to the intent of the Parties, even if in doing so,
invalidation of a specific provision of this Agreement is required to make
the
Agreement consistent with the foregoing stated intent. In the event that
a term,
provision, or clause cannot be so construed, interpreted or modified, the
validity, legality and enforceability of the remaining provisions contained
herein and other application(s) thereof shall not in any way be affected
or
impaired thereby and shall remain in full force and effect.
18. Waiver of Breach. The waiver by the Company or Employee of the breach of any provision of this Agreement by the other Party shall not operate or be construed as a waiver of any subsequent breach by that Party.
19. Entire
Agreement.
This
document contains the entire agreement between the Parties and supersedes
all
prior oral or written agreements, if any, concerning the subject matter hereof
(including, without limitation, that certain Employment Agreement, dated
as of
May 5, 2004, between the Company and Employee) or otherwise concerning
Employee’s employment by the Company (except for options to purchase shares of
the Company’s restricted stock previously granted to Employee). This Agreement
may not be changed orally, but only by a written agreement signed by both
Parties.
20. Governing
Law.
This
Agreement, its validity, interpretation and enforcement, shall be governed
by
the laws of the State of New York, excluding conflict of laws principles.
Employee hereby expressly consents to personal jurisdiction in the state
and
federal courts located in Long Island, NY for any lawsuit filed there against
him by the Company arising from or relating to this Agreement.
21. Notices.
Any
notice pursuant to this Agreement shall be validly given or served if that
notice is made in writing and delivered personally or sent by certified mail
or
registered, return receipt requested, postage prepaid, to the following
addresses:
If
to
Company: Chembio
Diagnostics, Inc.
0000
Xxxxxxxxxx Xxxx, Xxxxx X
Xxxxxxx,
XX 00000
Attention:
President
If
to
Employee: To
the
address for Employee set forth below his signature.
All
notices so given shall be deemed effective upon personal delivery or, if
sent by
certified or registered mail, five business days after date of mailing. Either
Party, by notice so given, may change the address to which his or its future
notices shall be sent.
14
23. Headings.
The
headings in this Agreement are for convenience only; they form no part of
this
Agreement and shall not affect its interpretation.
24. Construction.
Employee represents he has (a) read and completely understands this Agreement
and (b) had an opportunity to consult with such legal and other advisers
as he
has desired in connection with this Agreement. This Agreement shall not be
construed against any one of the Parties.
25. Insurance.
The
Company is to maintain directors’ and officers’ insurance in an amount
reasonably determined by the Board.
IN
WITNESS WHEREOF,
the
Parties have caused this Agreement to be executed the day and year first
above
written.
Employee: Company:
___________________________
By:
___________________________
Xxxxx
Xxxxxxxxxx, Individually Xxxxxxxx
X. Xxxxxxx, President
0
Xxxxx
Xxxxx
Xxxxxxxxxx,
XX 00000
15
